Here Comes Socialism: The New Business Model for Sustainable Food. But Does It Work?

Innovative new ways of doing business are blossoming on both coasts. MOO Milk and Bob’s Red Mill show how food companies that serve eaters, workers, and farmers can be the wave of the future.

Late last winter, when dairy giant HP Hood informed 10 Maine dairy farmers that it would no longer buy their milk, things looked pretty bleak. These farmers had invested in going organic to supply the burgeoning organic milk market, but now, with the price of organic milk lower than the cost of production, the farmers were left with two choices: sell their cows, or dump their organic milk on the conventional market for even less money.

Just a little over a year later, those same farmers are surviving (with the hope of thriving) in the future, thanks to an innovative new business structure called an L3C, a new form of incorporation for low-profit, limited liability corporations, that gives them eligibility to receive grants and endowments in the same way as a cooperative or non-profit. Besides being low profit, one requirement of an L3C is that it “have a social purpose.”

Grocery shelves across Maine are now stocking MOO (Maine’s Own Organic), consumers have access to high quality organic milk produced by family farmers, farmers get to keep their land, and radically, both consumers and farmers have wrested control from the market forces that usually rule us, and together are building an alternative food system that serves them.

David Bright, Secretary of Maine’s Own Organic Milk Company and member of the Maine Farm Bureau and Maine Organic Farmers and Gardeners Association took some time out from planting his spring peas to talk with me about how the business came together.

With a mission to “keep farmland and make farming profitable for farmers,” The Maine Farm Bureau teamed up with the Maine Organic Farmers and Gardeners Association and the idea of operating as an L3C was born. As Bright tells me, the founders have a social purpose of “providing an environment in which diary farmers can make money farming.”

Still, the problem of getting the milk processed, packaged, and to market remained. After all, Hood once paid for distribution. These farmers, some with as few as 15 cows, are located in remote rural areas far from processing plants or markets and don’t have tankers to transport their milk.

But a funny thing happened on the way to the farm. Putting aside any concerns about competition, two Maine dairies agreed to help. Smiling Hill Dairy agreed to become re-certified as an organic milk processor, purchase a new tank and process the milk. Another dairy, Oakhurst Dairy, donated the machine that packages the milk into cartons. Oakhurst also washes the MOO Milk tanker and does the lab work.

Says Bright, “We were fortunate in that we had some good Maine businesses that saw the importance of keeping these farms going.”

Sounds like socialism to me.

“We don’t plan to make a lot of money as a company,” explains Bright. “For example, if we were a co-op, sometimes decisions get made that are good for the company but not so good for the farmers. Basically, we’ll buy your milk and sell it and you’ll get 90% of the profits.”

Bright says the farmer gets about $1 for every half gallon of milk sold. That’s twice what conventional farmers under the federal order get. The farmers get the $1 no matter what and they also get 90% of any profit left after trucking, processing, marketing, fees and taxes.

The retail price of the milk is high – much higher than out-of-state organic milk from ($4.29/half in most grocery stores compared to $3.39-$3.99/half for other brands). But consumers, incredibly, are willing to pay it.

Customers are willingly paying the real cost of production for milk that they can feel good about. Farmers are making a living wage. And the money is staying right in the local community, creating jobs and wealth in Maine.

As Bright tells me, “The only money that goes out of state is to buy the cartons.”

Meanwhile, on the left coast, near the other Portland, Bob Moore of Bob’s Red Mill caused a stir back in February when he announced that he was handing over ownership of the privately held company to its employees in celebration of his 81st birthday. The stock transfer, once complete, could represent a significant wealth transfer to employees throughout the company. When you consider that Moore could have cashed out and sold his successful company to the highest bidder, this is really quite radical.

According to an article from Oregon Live, Bob’s Red Mill is a multi-million dollar company and has clocked in an annual growth rate of between 20 and 30 percent every year since 2004.

What does this mean to employees? I spoke with a few to find out, and asked Production Manager Jeff Schrader how he felt when he heard the news.

“I wasn’t surprised,” says Schrader. “We always knew he’d do something like that”¦it’s never been about the money. He’s absolutely astounded me personally with some of the other things he’s done over the years.”

He said that Moore has never made decisions based completely on the short-term bottom line. By way of example, he told me that rather than lay people off during slow times, Moore would instead rotate jobs, putting people where they were needed. The end result was better for the company in the long run because when busy times returned, there were always trained operators available.

I also learned that Moore comes to work everyday and is heavily involved in daily operations.

Yvonne Fyan, Customer Service Supervisor, who has been with the company 11 years, says the “enormity of what Bob did and what employees have for their futures,” is just starting to sink in.

Employees can’t buy or sell the stock, but it is transferred to them to be paid out when they leave (of their own accord or not) or retire. Think about the prospect of people who will be able to send their kids to college who might not have been able to otherwise.

I was curious to know if employees will have shared decision-making and will serve on the board. Via email, I learned from John Wagner, CFO and partner, that this ESOP is primarily a retirement plan with the same regulations as a 401(k) plan. For the immediate future the current officers of Bob’s Red Mill will continue in their existing roles running the company and making the day-to-day operating decisions.

As the company moves into 100% employee ownership, there will be a new Board of Directors made up of both employees and outside executives who will elect the officers of the company.

Fyan, for her part, loves the job. Her favorite thing is helping customers over the phone who have just been diagnosed with celiac disease and been given no information by their medical provider. She says, “It’s gratifying to be able to talk to people who are bewildered and scared and don’t know what to do.” Gluten-intolerant people are a large part of the Bob’s Red Mill consumer base.

All the grains are sourced from North American farms (most from the U.S.) and that they are all ground, processed and packaged right there in the company’s only plant in Oregon.

Since Fyan is one of the people who answer the phone when customers call, I asked her how customers had taken the news. She said there had been “an outpouring” of supportive emails and calls from happy customers who said they had no idea there was a real Bob and that he really owned the company and others who didn’t know of the company but said they would now seek out its products.

Apparently, people really like this “socialism” stuff.

And here’s a fun fact I learned: Moore really does wear the trademark red jacket that you see on the packaging. That combined with the name, Bob’s Red Mill, makes me think we’ve had these enemies in our midst, conspiring to redistribute wealth to scores of employees, for a very long time now. How could we have missed this enemy within?

This is the latest installment in Vanessa Barrington’s weekly column, The Green Plate, on the environmental, social, and political issues related to what and how we eat.

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